Tepper says the Fed's 1% real rate target is dead wrong if tax cuts happen and French election goes well.
“It's not wrong if there's no tax cuts necessarily. Certainly, if the French election goes the wrong way, not wrong. Not wrong. But it's gonna be dead freaking wrong.”
Tepper sees nothing negative for small businesses with deregulation and tax cuts ahead.
“If you're a small business, you there's nothing negative on the horizon. Nothing. What's negative? They're gonna give you less regulations for Obamacare. They're gonna give you a tax cut.”
Tepper admits ambivalence about Teva, vacillating between seeing value and questioning the position.
“Some days I say it's really cheap. I should buy more. And some days I don't know why the heck I look at”
Tepper says real rate should be three and a quarter but Fed will only reach 91 basis points.
“I think the real rate should be higher sooner because you have all these things happen. Maybe it should be three and a quarter.”
Tepper warns markets must prepare for Fed hikes in June, September, December and possibly more.
“You're gonna bet against these tax things. You're gonna bet against the French election. You better be you better be ready, and the market has to get ready for June increase Yeah.”
Tepper projects long-run growth could be 0.25-0.5% higher with deregulation, 3.5% in 2017-18.
“I'm saying I think the long run with in a deregulatory could be a quarter half point higher.”
Tepper says Allergan multiples were too low partly because the stock got tied to Valeant, which he calls nonsense.
“the multiples were too low, and they put for some reason because it was tied in somehow with the valiant, you know, the nonsense with valiant.”
Tepper argues Allergan's aesthetics business being taken down with regulated pharma was crazy since aesthetics isn't affected by regulation.
“It's not affected by, regulation, that part of the business, the aesthetics business. So we thought that part of the business getting, you know, taken down with everything else was just absolutely crazy.”
Tepper says three more hikes this year is more likely than two, questions if fourth should be priced.
“So I'm sure that the Fed funds odds are going up as we're speaking, and there's a better chance that they'll go three times more this year than two times more this year.”
Tepper says if Allergan went to 500 he wouldn't own a share, but he's not suggesting it will hit 500.
“If it went to 500, I wouldn't own a share. So, not suggesting it's going to 500,”
Tepper says market must prepare for Fed rate hikes in June, September, December and possibly more.
“You better be you better be ready, and the market has to get ready for June increase Yeah. September increase, December increase, and maybe more than that.”
Tepper says pharmaceuticals became oversold in the fall, prompting a bet weighted toward Allergan.
“We thought, in the fall, the pharmaceuticals went down to way too much. So that's why we made the bet. And and the bet was predominantly was probably Allegan leaned Allegan.”
Tepper believes stock market may have hit its yearly high due to interest rates around 3%.
“And it really has to do with interest rates. I'm not sure we're right on the cusp of breaking out on interest rates at this level, around 3%.”
Tepper is uncertain whether ten-year yields will break above 3% from current 2.98% level.
“I'm not sure we're right on the cusp of breaking out on interest rates at this level, around 3%. I think they closed at 2.98 on the ten year.”
Tepper says quantitative trading machines are performing poorly this year despite prevalence of algorithmic finance.
“Machines, to compete against machines, which there's a lot of machine finance. The machines are doing shitty this year.”
Tepper thinks stocks are okay but may have reached yearly highs due to interest rate concerns.
“I think they're okay. I don't think it's great. I think we might have reached the highs for the year. And it really has to do with interest rates.”
Tepper notes market multiples were 11-12 in 2010, and 225 earnings at 16 multiple equals 3,600 S&P level.
“Coming out of 2009 and rates. I mean, to get to this multiple now is, if you had two twenty times, two twenty five times 16 is 3,600.”
Tepper says stock market up nearly 10% from 3,600 lows doesn't help the Fed.
“All these different things being easier since then, obviously, the stock market says those 3,600 lows up near 10%. Well, that doesn't do much for you if you're the fed.”
Tepper says he is leaning short on bonds despite being generally an optimist by nature.
“But for me as a hedge fund manager, I'm going to lean short. You know, I'll be short bonds and I'm not a great, I'm like generally an optimist.”
Tepper emphasizes coordinated global tightening is rare and central banks are signaling further tightening ahead.
“I mean, we don't have coordinated tightening around the whole world and everybody tightening at the same time too often. You just don't. And I don't have people telling me they're gonna go further tightening.”
“But the truth is that was in November where rates peaked, mortgage rates peaked in early November. Well, they're down 90 basis points since then. Okay. That doesn't really help you a lot.”
Tepper says he is leaning short on equities because risk-reward doesn't make sense given central bank guidance.
“I would probably say I'm leaning short on the equity markets, you know, so right now, because I think they're, you know, I think the upside downside just doesn't make sense to me when I have so many people telling me, so many central banks telling me what they're going to do,”
Tepper says if China stimulates successfully and animal spirits return, Japan will be a major beneficiary.
“If you look what happens, if China runs and they get the economy going and you get the animal spirits going, what happens?”
Tepper says he strongly prefers split government and is pleased with current electoral outlook.
“I am a big proponent of split government. And right now, as you're more than aware of Yep. It looks like the senate is, republican and the house is democratic, and I'm loving life.”
Tepper ranks investment regions as China first, then Asia broadly, then Europe, then Japan, then U.S.
“Right? Asia at large second. Okay. Japan, then Japan, you know, Korea, those markets. Also, Asia and Europe and Europe before Japan.”
Tepper explains split government is best for markets and economy, rejecting either party's sweep.
“But from a from this market perspective, an economic perspective, what's good for the economy, I wanna split government. And I don't want all Democrats, and I don't want all Republicans.”
Tepper argues meeting AI power needs will require natural gas, not just nuclear.
“It has to be if you're gonna meet these power needs of what they need for AI, you're gonna have to use natural gas.”
Tepper says he likes NVIDIA at current price levels despite earlier concerns.
“I I I kinda like NVIDIA, the price. Okay? So don't get me wrong. I I I could just love it.”
Tepper says he has no confidence in NVIDIA earnings forecasts for 2026 and 2027.
“I have no idea in '26 and '27. I am no idea. Okay? I mean, as if I was but I don't believe I don't believe my analysts.”
Tepper warns markets could face problems if election results surprise split-government expectations.
“So if it gets surprised, that could be a problem for the markets. But as long as it's a split, the market's gonna be fine.”
Tepper says he's constructive on Fed easing but concerned about current market valuation levels.
“look, I'm constructive because of the easing right now, but I'm also miserable because of the levels.”
Tepper is unhappy owning the market despite a good year because of valuation concerns.
“I'm so miserable for having a really good year. Because I still own the market, and I can't stand that I own the market.”
Tepper calls 25% or 50% tariffs destructive, drawing a line above 10% levels.
“I don't love the the 25% or the 50% tariffs. I think they're a little bit destructive.”
Tepper estimates China has $7 trillion in excess savings that haven't been spent or invested.
“They haven't invested it. I mean, they're huge. I mean, they're we looked at the other day, don't know if it's true or not, like $7,000,000,000,000 of excess saving”
Tepper says big stocks aren't cheap but he won't fight the Fed in the near term.
“The big stocks are not cheap. I mean, so you don't have cheapness here, but you do have a constructive you know, like, you know, I'm not fighting the Fed.”
Tepper says he owns NVIDIA but trades in and out, not holding a constant position.
“I do own NVIDIA, but I go back and forth and back and forth a little bit, because I do, you know, I will trade a little bit.”
Tepper says large fund size constrains his ability to move positions quickly.
“You have a larger fund. It's hard to move, you know. So that's that's the challenge for, you know, guys that are a lot a little bit larger in size.”
Tepper says he's miserable despite a good year because he owns the market at high multiples.
“I I we're having a really good year, and I'm so miserable for having a really good year. Because I still own the market, and I can't stand that I own the market.”
Tepper says Alibaba is up significantly and Appaloosa is having a pretty good year.
“I mean, like Alibaba's up a lot, so it worked pretty well. So, I mean, we're having a pretty good year.”
Tepper won't fight the Fed with market pricing 1.75 more cuts before year end.
“I'm not ever fighting this fad, especially when the market's telling me I have I don't know what it is today, but 1.75, more cuts, you know, before the end of the year.”
Tepper is constructive on Fed easing but concerned about high market valuation levels.
“I'm constructive because of the easing right now, but I'm also miserable because of the levels.”
Tepper says one or two more rate cuts won't be too easy, but beyond that risks repeating the 2000-2001 crash.
“I don't think another ease matters, you know, as far as being too easy. This is gonna be a little bit restrictive.”